An All-Party Parliamentary Group on personal finance issued a statement yesterday stating that ‘rent-to-own’ plans mean customers pay three times as much as they would if they bought the same items up front.

‘Rent-to-own’ schemes have burgeoned in recent years, as consumers have struggled to access credit, and prices of electrical goods have risen. Dedicated chains, such as BrightHouse and PerfectHome, exclusively offer these provisions, and have over 350,000 customers. The Group has found that these firms can charge annual interest of up to 94.7 per cent on purchases, and oblige customers to take out expensive insurance policies too.

Research released by the Group reveals the significant mark-ups customers incur by choosing ‘rent-to-own’; a freezer costing £644 at John Lewis would cost BrightHouse customers £1,716, while a washing machine costing £295 at Co-Op Electricals would cost £1,092. More than one in five BrightHouse customers’ accounts are currently in arrears, and more than 10 per cent of customers have had goods repossessed.

The report concluded that transparency in rent-to-own contracts was poor, the mandatory insurance offered represented bad value and that policies were often mis-sold to customers who already had adequate insurance coverage. Recommendations include a ban on compulsory insurance and the introduction of ‘health warnings’ to ensure consumers understand the costs and risks involved.

“Some of the poorest people in the country are paying several times the true value of goods. Many customers simply can’t keep up and the goods are taken back to be sold again,” said Yvonne Fovargue MP, head of the Group. “The FCA needs to act now to stop RTO customers from being ripped off.”

Leo McKee, chief executive of BrightHouse, said he was disappointed by the Group’s tone, and their recommendations, remarking “the service we provide gives people access to high-quality products for their homes at competitive prices.”